Indian pharmaceutical industry is set to emerge as an export oriented sector in the years to come going by its current growth rate. A Pharmabiz study of the export performances of 25 top Indian pharmaceutical companies shows that their exports grew by 36.2 per cent in 2006-07 to Rs.15,574 crore as against Rs.11,436 crore achieved in the previous year.
The figures also indicate that exports of these companies accounted for almost 49 per cent of their net sales during the year as against 44.6 per cent in the previous year. With their thrust towards developing new markets through focused product development, export growth of these companies could be much faster.
There was remarkable shift in revenue composition and many companies strengthened their international operations during 2006-07. The strong export growth of over 36 per cent is quite remarkable considering the overall pharmaceutical growth in the highly regulated market was restricted to 6 to 7 per cent. Despite stiff generic competition, reduction in healthcare spending by few countries, stringent regulatory norms for drug approvals, higher marketing & administrative costs, pricing pressure, a renewed focus on product safety by regulatory agencies and legal battles including challenges to patents, Indian companies have successfully turned the corner into their favour in the international market.
The revenues from all important markets like US, Canada, Europe, Latin America, CIS & Russia, Middle East, Africa and other emerging markets added to export earnings of Indian pharma companies. Export business is dominated by generics segment and followed by active pharmaceutical ingredients & intermediates, formulations and biotech products. As a cost cutting measures, several multinational companies are outsourcing production from research based Indian companies and the revenues from CRAMS to Indian companies are likely to increase significantly in the coming years.
The important factors like higher filing of DMFs and ANDAs, higher approvals from US and European regulatory authorities, investments in latest technologies, focus on research and development, cost effective product range, expiration of patents protection, mergers & acquisitions, marketing tie-ups, in-licensing and contract research and manufacturing services (CRAMS) assisted Indian pharma segment during 2006-07. Further, the aging of the world's population continues unabated, generating steadily increasing demand for medicines due to the rising incidence of degenerative diseases and cancer as people grow older.
The multinational companies are investing huge funds in R&D to create strong product pipeline during last few years. The outcome from these investments in R&D is not giving expected returns to them or there is slow down in research productivity. Though the companies are trying for development of new breakthrough molecules, the final results are not so promising one. This factor has also assisting to export growth of Indian companies. Further, the timely launch of new generic and get 180-day exclusivities in the US also pushed their export earnings.
Dr Reddy's Laboratories (DRL), the second largest pharma company in terms of standalone net sales, was the star performer on export front with export earnings of Rs 2,848 crore in 2006-07 as compared to Rs 1,197 crore in the last year, representing growth of 138 per cent. DRL's exports contributed 76 per cent as against 59.7 per cent in the last year to its standalone net sales of Rs 3,750 crore. The company launched simvastatin and finasteride, the generic versions of Zocor and Proscar respectively, as authorized generic products of Merck. These products alone contributed to Rs 1,581 crore or 24 per cent of its total revenue. The company also launched ondansetron and fexofenadine during 2006-07.
This was followed by Plethico Pharmaceuticals and Divi's Laboratories with strong export earnings growth of 112 per cent and 100 per cent respectively. Plethico Pharmaceuticals' export earnings touched to Rs 184.64 crore in 2006-07 from Rs 87.08 crore in the previous year. Its exports as per cent of net sales worked out to 57.9 per cent as against 39.2 per cent. Similarly, Divi's Laboratories' exports increased to Rs 671.21 crore from Rs 334.80 crore, with significant contribution of 92.7 per cent to its sales as compared to 87.8 per cent in the last year. Its exports to advanced markets comprising Europe and America accounted for 75 per cent of business.
The four leading companies i.e. Ranbaxy Laboratories, DRL, Cipla and Aurobindo Pharma achieved export earnings of more than Rs 1,000 crore during 2006-07. The export earnings of Ranbaxy Laboratories increased by 16.4 per cent to Rs 2,589 crore from Rs 2,224 crore in the previous year, representing an export contribution of 65.1 per cent to its standalone net sales of Rs 3,978 crore. Cipla's exports increased by 17.6 per cent to Rs 1,780 crore and that of Aurobindo's went up by 32.9 per cent to Rs 1,085 crore. Similarly, Lupin, Orchid Chemicals and Divi's Lab recorded export earning of more than Rs 500 crore during 2006-07.
Out of Pharmabiz sample of 25 companies, the contribution of export earnings to net sales of 15 companies worked out to more than 50 per cent during 2006-07 as against 12 companies in the last year. However, the percentage of export earnings to sales of seven major companies like Cipla, Wockhardt, Ipca Laboratories, Aventis Pharma, Torrent Pharma, Stride Arcolab and Shasun Chemicals was lower during 2006-07. Lupin's export earnings as percentage of net sales remained same at 48.6 per cent. The export earning of two companies viz., Aventis Pharma and Shasun Chemicals, declined by 06 per cent and 1.8 per cent during 2006-07.
The leading 10 pharma companies, with standalone net sales of more than Rs 1,000 crore, recorded export growth of 39.6 per cent during 2006-07 to Rs 10,713 crore from Rs 7,672 crore in the previous year. All the ten top companies recorded double digit export growth. DRL, Aurobindo Pharma, Sun Pharma, Nicholas Piramal and Cadila Healthc have notched up export growth of over 25 per cent. Though the export earnings of GlaxoSmithKline Pharma (GSK) were only Rs 30 crore, we have included GSK in our study on account of its size of net sales of Rs 1,553 crore during 2006-07. GSK's exports increased only by 10.5 per cent and contributed only 1.9 per cent to its total net sales.
Thus, the Indian companies are now giving tough time to multinational giants and taking away their market share. Several blockbuster molecules had gone off patent and more are likely to loose patent protection in the coming years. With strong R&D base and talent pool Indian companies will further spread their market presence in the coming years. The mergers & acquisitions and faster integration of merged company's activities will give necessary boost to export business. However, the volatile foreign exchange rates may put some pressure on earnings.
View Table Export earnings : 2006-07 & 2005-06